Canada chemical firm Canexus prepares to ship oil to US by rail

TORONTO (ICIS)--Canadian sodium chlorate and chlor-alkali producer Canexus is developing a rail service to ship heavy oil and bitumen from western Canada to the US, the company said on Friday

Canexus is moving into oil rail shipping as Canadian crude oil producers do not have enough pipeline capacity for exports to the US.

The company, which ships its commodity chemicals by rail, is expanding its rail terminal at ?xml:namespace>Bruderheim, Alberta, as it has gained contracts for oil shipments. For 2013, it expects to transload 30,000 bbl/day of oil, up from an average of 8,000 bbl/day in 2012.

In a conference call on Friday, CEO Gary Kubera said Canexus is seeing strong demand for oil railcar shipping from oil-industry customers.

He said Canexus already has rail services contracts in place with Canadian oil firm MEG Energy and is close to completing deals with other customers.

In the longer term, Canexus might also invest in oil rail off-load logistics at locations in the US, but such a “sister project” is not an immediate priority for the company, he said.

Alberta’s heavy crude sells at significant discounts to West Texas Intermediate (WTI) in the US market, mainly because of pipeline capacity constraints that prevent it from reaching refineries on the US Gulf Coast, where much higher world oil prices prevail.

According to Toronto-based Scotiabank, western Canadian crude traded at a $36.94/bbl discount to WTI in February.

The long-delayed 1,900km Keystone XL oil pipeline project that would enable Canadian oil to reach US Gulf Coast refineries has yet to be approved by the US.

Canexus is a spin-off from Nexen, the Canadian oil major that was acquired last month by China's state oil major, China National Oil Offshore Corp (CNOOC).